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SmartCredit.com President of Consumer Education John Ulzheimer on the pitfalls of prepaid debit cards and the CFPB’s probe into the industry.
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In focus tonight the Consumer Financial Protection Bureau taking aim at prepaid debit cards the agency wants more info about -- to better regulate the industry.
Currently prepaid debit cards aren't required to offer some of the same consumer protections -- conventional credit cards or debit cards that are tied to banks.
But all that could change John Alzheimer is the president of consumer education for Smart credit dot com.
Are we -- this that I you know frankly this is not my favorite.
Financial product out there in the marketplace.
And the idea that that bureau is just getting its arms around this is laughable.
Yet it it's my least favorite of all the financial sir I rank it right up there if payday loans and title -- -- We you know and at what other respect to the CTB I don't know that.
That has become prepaid debit cards -- we wouldn't have this conversation twelve months ago.
We would have been able to name why not well known bank that issued prepaid debit cards American Express.
Today we can name a half a dozen -- -- banks that issue prepaid debit cards and half a dozen celebrities that have endorsed them power so it has.
It has been eight hideaway -- and now they're just trying to catch up.
Well take a look at the the amount of money loaded on prepaid debit cards right now in 20 X 20 fourteen -- a 167 billion.
Double what it is today the numbers going up and going up dramatically.
A lot of people out there are believed that these are great product busy as you and I talked about numerous times.
The fees on these things are outrageous and the -- was talking about having better disclosure for Fay is now that makes a lot of sense.
I'm I gotta tell yeah I I'm a little bit disappointed that they are tackling invest simply from a disclosure perspective -- realize it's not just that.
But it seems like the primary thing in a cross hairs right now was this is the disclosure of fees.
But out of here a lot of Citi I think the bigger problem -- prepaid debit cards in addition to the fee is.
And how they're marketed and -- and I have not seen anything that suggests that the CF TB is gonna tackle how they're being marketed and position to consumers that's why they're getting them because about how they're being marketed.
Now they've got Dan now with the problem begins simply telling them not follow all the fees but kind of blanketing that went all these lies and innuendoes about credit done.
-- and how they're gonna help -- score that's the real problem in my mind.
I I understand what you're saying you've described them on the show in the past as glorified.
Gift cards.
And people out there feel like they've got a real relationship with the bank that there.
Building some kind of credit history none of that it's happening and it seems to me the nearest her pride itself on giving good advice to consumers.
But here -- boy they've really missed an opportunity.
Yeah I I don't disagree and we still don't know exactly what they're going to be but -- if this ends up being and we all have to and it.
Bernardino disclosed clearly what the fee structures are going to be on the home page -- that will be a massive failure to consumers.
That these structures are already on a lot of these -- -- just have to -- -- -- searching for them but you -- in fact find them.
It is if that's where they -- -- that's a big swing and amass debate really need to tackle what's being said and what's how are being marketed.
That they -- cheaper than a well managed checking account in her act if they're gonna help other credit and correct that's what they need to tackle Obama highs that are being set about these products.
And of course a lot of bankers now -- are issuing these cards because they've lost a stream of revenue from credit card and as a Dodd-Frank so desperate to find earnings per share.
-- they're putting these out this out cards out Willy Nilly.
And not realizing the consumers out there -- this is not a great thing for them.
Well this -- Not -- product it's targeted towards the consumer -- -- sophisticated.
-- -- -- -- world of consumer finance these are targeted to consumers are down on the locks are on it under educated.
About these types of products and are easy credit -- -- And that's the consumer that we -- -- necessarily shield from all these products that we have to make sure that I -- a firm understanding of the pros.
And cons of all these in addition to the fees.
And an honest to valuation looking dirt adults who sign -- for these cards and you can't just hold our hands -- life Baptist and that we stand up and take responsibility for their own actions.
But you can't make sure that what's being said about -- -- is not.
Borderline deceptive and borderline dishonest interesting stuff John thanks for coming on the show tonight appreciate it.
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